Core Viewpoint - OceanFirst Financial Corp. has agreed to acquire Flushing Financial for $579 million, marking one of the last bank deals of 2025, with the transaction expected to close in Q2 2026 [1][9]. Group 1: Deal Structure and Financials - The merger will create a regional entity with $23 billion in assets and 71 branches across New Jersey, New York, and Philadelphia [2][9]. - OceanFirst's common stock will represent approximately 58% of the merged company, while Flushing stockholders will hold about 30%, and shares issued to Warburg Pincus will account for around 12% [2][9]. - The transaction is projected to result in a tangible book value dilution of about 6%, which is expected to be recovered in roughly three years, with an anticipated earnings per share accretion of about 16% and an internal rate of return of about 24% in 2024 [8]. Group 2: Strategic Rationale and Market Context - The merger is seen as a natural extension of OceanFirst's growth strategy, combining Flushing's presence in Long Island and New York City with OceanFirst's business model [6]. - The past year has witnessed a resurgence in bank consolidation, particularly among small regional and community institutions, with over 170 deals valued at more than $47 billion in 2025 [12]. Group 3: Management and Governance - Upon regulatory and shareholder approval, OceanFirst CEO Christopher Maher will become the chief executive, while Flushing CEO John Buran will serve as non-executive board chairman, with a board comprising 17 directors [10]. - Warburg Pincus will invest $225 million in the combined company, securing a board seat and a 12% ownership stake [9][11].

Core Viewpoint - Burke & Herbert Financial Services Corp. has announced its second acquisition, acquiring Linkbancorp for $354.2 million in stock, marking a significant step in its regional expansion strategy [2][3]. Company Overview - Burke & Herbert Financial Services Corp. has $7.9 billion in assets and is Virginia's oldest bank, established 173 years ago [2][3]. - Linkbancorp, founded in 2018, has $3.1 billion in assets and has previously engaged in M&A to drive growth [6]. Acquisition Details - The acquisition of Linkbancorp will increase Burke & Herbert's total assets to $11 billion and deposits to $9.1 billion [3]. - The deal is expected to yield cost savings of 37.5% on Linkbancorp's noninterest expenses, which were $74.9 million in 2024 [3]. - Earnings-per-share accretion is projected to be 18% in 2027, the first full year of combined operations [3]. Market Expansion - This acquisition allows Burke & Herbert to enter the Pennsylvania market, expanding its footprint to over 100 locations across six states [8]. - The deal is viewed as a strategic move to enhance geographic diversification and scale [8][9]. Management and Governance - Linkbancorp shareholders will own approximately 25% of the merged entity, with two Linkbancorp directors joining Burke & Herbert's board [7]. - Linkbancorp's CEO will serve as a senior advisor and join the board of Burke & Herbert Bank [7]. Analyst Insights - Analysts have described the acquisition as transformative, enhancing Burke & Herbert's earnings potential and mitigating the impact of losing interchange income due to asset thresholds [4][8]. - The previous merger with Summit Financial Group exceeded expectations in terms of cost savings and capital generation, indicating a positive trend for future acquisitions [10].

Financial Performance - Net income attributable to the Company for Q3 2023 was $4.5 million, or $0.25 per share, a 10.4% increase from $4.1 million, or $0.23 per share, in Q3 2022 [257]. - For the nine months ended September 30, 2023, net income attributable to the Company was $11.6 million, or $0.65 per share, a 23.8% increase from $9.4 million, or $0.52 per share, in the same period of 2022 [258]. - The increase in net income was primarily driven by higher net interest income and a lower provision for credit losses, despite a decrease in noninterest income and an increase in noninterest expenses [266]. - The efficiency ratio for Q3 2023 was 63.37%, an improvement from 64.00% in Q3 2022 [264]. - Noninterest income for the three months ended September 30, 2023 decreased by $134 thousand, or 10.8%, compared to the same period in 2022 [346]. Deposits and Loans - The Company's total deposits decreased by 1.2% as of September 30, 2023, compared to December 31, 2022, but increased by 0.3% in the third quarter of 2023 [239]. - Total deposits decreased to $1.32 billion, a decrease of $16.6 million, or 1.2%, due to competitive pressures and negative banking industry developments [267]. - Loans, net of unamortized discounts, increased to $1.30 billion, an increase of $64.6 million, or 5.2%, driven by organic growth and expansion into the Greater Washington market [267]. - The loan-to-deposit ratio increased to 98.1% at September 30, 2023, compared to 92.0% at December 31, 2022 [383]. - Average total deposits decreased by $150.7 million, or 10.2%, for the three months ended September 30, 2023, compared to the same period in 2022 [377]. Interest Income and Margin - The Company recorded a higher net interest margin on a tax-equivalent basis, driven by increased average loan balances and higher yields earned [262]. - The Company's net interest margin increased to 4.09%, representing an increase of 41 basis points for the three months ended September 30, 2023, compared to the same period in 2022 [282]. - Net interest income for the three months ended September 30, 2023, was $15.3 million, an increase of $404 thousand, or 2.7%, compared to the same period in 2022 [278]. - Total interest income increased by $12.0 million, or 26.8%, while total interest expense increased by $6.3 million, or 127.8%, for the nine months ended September 30, 2023 [291]. - The Company anticipates that overall costs of funds will continue to increase throughout the balance of 2023, likely leading to a compression of the net interest margin [304]. Credit Losses and Allowance - The Company maintains an allowance for credit losses to absorb expected losses on loans, with provisions charged against operating earnings as needed [237]. - The provision for credit losses was lower due to more favorable economic assessments and lower net charge-offs, partially offset by a higher required reserve on unfunded credit commitments [262]. - As of September 30, 2023, the company's allowance for credit losses was $16.1 million, representing 1.24% of total outstanding loans, an increase from $14.3 million or 1.16% at December 31, 2022 [321]. - The provision for credit losses in Q3 2023 was $2 thousand, a significant decrease of $417 thousand or 99.5% compared to $419 thousand in Q3 2022 [321]. - The allowance for credit losses as a percentage of nonaccrual loans was 842.51% at September 30, 2023, compared to 664.58% at December 31, 2022 [331]. Market Conditions and Economic Outlook - The Federal Reserve's target rates have increased to a range of 5.25% to 5.50%, impacting the Company's financial results throughout 2023 [245]. - The Company continues to face uncertainties related to inflation, rising interest rates, and potential recessionary conditions in the U.S. economy [245]. - The Company’s financial performance is highly dependent on the business environment in its primary markets and the overall U.S. economy [244]. - The Company is actively monitoring balance sheet trends and liquidity needs in response to recent banking industry developments and economic conditions [240]. - The Company is closely monitoring liquidity impacts from industry developments and market conditions, particularly regarding traditional liquidity sources [403]. Merger and Growth Strategy - The Company anticipates closing the merger with LINK in the fourth quarter of 2023, with shareholders owning approximately 56% and 44% of the combined company, respectively [242]. - The Company is focused on growth in the Greater Washington market and anticipates benefits from the merger with LINK [242]. - The Company has taken preemptive actions to address deposit outflows and maximize funding sources in light of recent banking industry challenges [239]. - The overall increase in loans from December 31, 2022, to September 30, 2023, was primarily due to organic growth, including approximately $4.0 million related to expansion into the Greater Washington market [364]. - The Company aims to manage interest-sensitive assets and liabilities to mitigate risks from interest rate fluctuations and inflation [404].

Financial Performance - Net income attributable to the Company for Q2 2023 was $3.8 million, or $0.21 per share, an 18.4% increase from $3.2 million, or $0.18 per share, in Q2 2022 [251]. - For the first half of 2023, net income attributable to the Company was $7.1 million, or $0.39 per share, a 34.1% increase from $5.3 million, or $0.29 per share, in the same period of 2022 [251]. - The increase in net income for the first half of 2023 was primarily driven by an increase in net interest income, partially offset by a higher provision for credit losses and increased expenses [260]. - Net interest income increased by $2.0 million, or 15.1%, compared to the second quarter of 2022, with a net interest margin of 4.03%, an increase of 84 basis points [276]. - Net interest income increased by $5.2 million, or 21.0%, with the net interest margin rising to 4.09%, an increase of 98 basis points for the six months ended June 30, 2023 [287]. - Total interest income increased by $8.6 million, or 30.7%, while total interest expense increased by $3.4 million, or 101.3%, for the six months ended June 30, 2023 [287]. - The net yield on interest-earning assets increased to 4.09% for the six months ended June 30, 2023, compared to 3.12% for the same period in 2022 [307]. Deposits and Liquidity - The Company's total deposits decreased by 1.6% as of June 30, 2023, compared to December 31, 2022, indicating minimal deposit outflow in the first half of 2023 [233]. - Total deposits as of June 30, 2023 were $1.32 billion, a decrease of $21.1 million, or 1.6%, from December 31, 2022, primarily due to deposit outflows [261]. - Average total deposits decreased by $184.0 million, or 12.3%, to $1.31 billion for the three months ended June 30, 2023, compared to the same period in 2022 [372]. - Core deposits decreased by $66.8 million, or 5.2%, to $1.21 billion at June 30, 2023 [377]. - The Company anticipates that a stable base of deposits will be its primary source of funding for both short-term and long-term liquidity needs in the future [377]. Credit Quality - The Company maintains an allowance for credit losses to absorb expected losses on loans, which is charged against operating earnings as needed [231]. - The allowance for credit losses increased by $1.3 million due to the adoption of the CECL Standard, reflecting a proactive approach to managing credit risk [311]. - The provision for credit losses in Q2 2023 was $93 thousand, a decrease of $226 thousand or 70.8% compared to $319 thousand in Q2 2022, primarily due to changes in economic assessments and lower net charge-offs [315]. - Nonperforming assets totaled $2.7 million, an increase of $543 thousand from December 31, 2022, with nonperforming loans as a percentage of total assets at 0.18% [267]. - The allowance for credit losses to total loans ratio was 1.27% at June 30, 2023, compared to 1.16% at December 31, 2022 [268]. - The net charge-off ratio for total loans receivable was (0.01)% for the six months ended June 30, 2023, compared to 0.17% for the same period in 2022 [338]. Mergers and Acquisitions - The Company and LINK announced a merger agreement, with the Company's shareholders expected to own approximately 56% of the combined entity upon completion [235]. - Merger-related expenses for Q2 2023 amounted to $428 thousand, compared to $157 thousand in the same period of 2022 [256]. - For the first half of 2023, merger-related expenses totaled $1.5 million, compared to $553 thousand in the same period of 2022 [257]. - Merger-related expenses increased by $271 thousand, or 173.0%, due to higher legal fees associated with the pending merger with LINK [344]. Economic Environment and Strategy - The Company is actively monitoring balance sheet trends, deposit flows, and liquidity needs in light of recent banking industry events and a rising interest rate environment [234]. - The Company is focused on growth in the Greater Washington market as part of its strategic business initiatives [224]. - The Company is closely monitoring the impact of inflation, rising interest rates, and economic uncertainty on its financial condition and results of operations [238]. - The Company anticipates that overall costs of funds will continue to increase throughout the balance of 2023, likely leading to a compression of the net interest margin [297]. - The company's management continues to assess the impact of economic trends and potential recession risks on the loan portfolio, with no material impact on delinquencies or nonperforming assets as of June 30, 2023 [316].

Financial Performance - Net income attributable to the Company for Q1 2023 was $3.3 million, or $0.19 per share, a 57.9% increase from $2.1 million, or $0.12 per share, in Q1 2022 [257]. - The annualized return on average assets for Q1 2023 was 0.87%, up from 0.51% in Q1 2022 [260]. - The annualized return on average equity for Q1 2023 was 9.65%, compared to 6.17% in Q1 2022 [260]. - The efficiency ratio improved to 70.65% in Q1 2023 from 78.41% in Q1 2022 [260]. - Net interest income increased by $3.3 million, or 27.4%, for the first quarter of 2023, with a net interest margin of 4.14%, up 110 basis points from the same period in 2022 [279]. - Total interest income for the three months ended March 31, 2023, was $18,043 thousand, an increase of $4,339 thousand or 31.6% compared to $13,704 thousand for the same period in 2022 [292]. - Net interest income for the first quarter of 2023 was $15,220 thousand, up from $11,955 thousand in the first quarter of 2022, reflecting an increase of $3,265 thousand or 27.3% [295]. Deposits and Loans - The Company's total deposits decreased by 2.0% as of March 31, 2023, compared to December 31, 2022, indicating minimal deposit outflow in the first quarter [240]. - Total deposits decreased by $27.1 million, or 2.0%, to $1.31 billion as of March 31, 2023, due to competitive pressures and negative industry developments, partially offset by organic growth in interest-bearing deposits [270]. - Total loans increased to $1,247,192 thousand in Q1 2023, up from $1,134,506 thousand in Q1 2022, marking a growth of 9.9% [292]. - Average total deposits decreased from $1.46 billion to $1.32 billion, a decrease of $146.8 million, or 10.0%, for the three months ended March 31, 2023 compared to the same period in 2022 [351]. - The loan-to-deposit ratio increased to 95.3% at March 31, 2023, compared to 92.0% at December 31, 2022 [354]. Credit Quality - The Company maintains an allowance for credit losses to absorb expected losses on existing loans, with provisions charged against operating earnings as needed [235]. - The allowance for credit losses as of March 31, 2023, was $16.1 million, representing 1.29% of total outstanding loans, compared to $14.3 million or 1.16% at December 31, 2022 [303]. - The provision for credit losses in Q1 2023 was $300 thousand, a significant increase of $235 thousand or 362.2% from $65 thousand in Q1 2022 [303]. - Nonperforming assets totaled $2.2 million as of March 31, 2023, a decrease of $33 thousand from December 31, 2022 [268]. - Nonaccrual loans were approximately $2.1 million at March 31, 2023, down from $2.2 million at December 31, 2022 [268]. Market and Economic Conditions - The Company is facing uncertainties related to inflation, rising interest rates, and potential recessionary conditions in the U.S. economy during 2023 or 2024 [240]. - The economic environment, including higher interest rates and inflation, is expected to continue negatively impacting the company's financial position throughout fiscal year 2023 [311]. - The Company anticipates continued increases in overall costs of funds throughout 2023, likely leading to compression of the net interest margin [289]. Mergers and Acquisitions - The Company announced a merger agreement with LINK, where the Company's shareholders will own approximately 56% and LINK shareholders will own approximately 44% of the combined company upon completion [241]. - The Company has terminated the merger agreement with OCFC, with both parties mutually agreeing to bear their own costs and expenses [242]. - The Company incurred $1.0 million in merger-related expenses in Q1 2023, compared to $396 thousand in Q1 2022 [263]. Liquidity and Capital - The Company is well-capitalized and its liquidity position remains strong despite recent volatility in the banking industry [239]. - The Company is closely monitoring liquidity impacts from developments in the banking industry and potential declines in the fair value of its investment securities portfolio [371]. - The Company aims to manage the relationships between interest-sensitive assets and liabilities to protect against interest rate fluctuations [372].

Merger and Acquisition - The Company announced a merger agreement with LINK, where each share of the Company's common stock will be converted into the right to receive 1.150 shares of LINK common stock[138]. - The merger is subject to various regulatory approvals, which may impose unforeseen conditions or delays, potentially affecting the completion timeline[139]. - If the merger is not completed by February 22, 2024, either party may terminate the agreement, which could adversely impact the Company's financial condition and stock price[141]. - The Company has incurred substantial expenses related to the merger negotiations, which would be recognized without realizing the expected benefits if the merger fails[142]. - The ongoing merger process may create uncertainties that could affect employee retention and customer relationships, potentially harming the Company's operations[143]. Economic Conditions and Risks - Changes in interest rates, influenced by the Federal Reserve's actions, could impact the Company's net interest income, which is crucial for its earnings[155]. - The Federal Open Market Committee has raised the federal funds rate to a range of 4.75% to 5.00% as of March 2023, with further increases expected in 2023[155]. - The COVID-19 pandemic has led to economic disruptions, contributing to higher inflation and potential recessionary trends that could adversely affect the Company's financial results[150]. - The Company faces risks from general economic conditions, including inflation, employment levels, and geopolitical developments, which could lead to increased loan delinquencies and decreased demand for its products[157]. - A future economic downturn could adversely affect the Company's net income or loss due to increased loan charge-offs and provisions for credit losses[165]. Credit Losses and Allowance - The Company maintains an allowance for credit losses, which is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio[160]. - The Company evaluates its allowance for credit losses based on various factors, including local economic conditions and delinquency trends[168]. - The adoption of the Current Expected Credit Losses (CECL) model in 2023 may require the Company to significantly increase its allowance for credit losses[179]. - The Company’s allowance for credit losses is based on management's estimates of probable losses inherent in the loan portfolio, adjusted for qualitative factors[405]. - The Company aims to minimize the unallocated portion of the allowance for credit losses through refined methodologies[436]. Financial Performance - Net income attributable to Partners Bancorp increased to $13,615 thousand in 2022, up 83.9% from $7,411 thousand in 2021[413]. - Basic and diluted earnings per share rose to $0.76 in 2022, compared to $0.42 in 2021, reflecting an increase of 80.95%[413]. - Net interest income after provision for credit losses was $54,648 thousand in 2022, up 23.8% from $44,107 thousand in 2021[413]. - Total assets decreased from $1,644,979 thousand in 2021 to $1,574,612 thousand in 2022, a decline of approximately 4.25%[411]. - Total liabilities decreased from $1,503,611 thousand in 2021 to $1,435,283 thousand in 2022, a reduction of approximately 4.54%[411]. Regulatory and Compliance - The Company is subject to regulatory actions that could impose fines or restrictions on its business activities[222]. - The company’s total assets and liabilities are subject to periodic examinations by regulatory authorities, ensuring compliance with federal and state regulations[420]. - The Company currently maintains regulatory capital ratios exceeding the levels established for "well-capitalized" institutions[202]. Competition and Market Risks - The financial services industry is highly competitive, and the Company faces competition from both traditional and nontraditional financial institutions[173]. - Negative perceptions about the financial services industry, such as Moody's rating change of the U.S. banking system outlook from "stable" to "negative," could lead to increased volatility in bank securities[185]. - The Company may face challenges in accessing adequate funding sources due to market-wide phenomena such as inflation and rising interest rates[184]. Operational Risks - The Company faces risks related to cybersecurity, including potential costs from cyber-attacks and the need for additional resources to enhance protective measures[209]. - The financial performance of the Company may suffer if its information technology does not keep pace with industry developments and customer demands[213]. - The Company has developed a comprehensive business continuity plan to mitigate risks from disruptions or failures of financial systems due to external events[228]. Investment and Securities - As of December 31, 2022, the total investment securities with unrealized losses amounted to $132.136 million, with gross unrealized losses of $17.039 million[475]. - The Company has four agency investment securities, five municipal investment securities, and twenty-three mortgage-backed securities that have been in a continuous unrealized loss position for more than twelve months, but no evidence of other-than-temporary impairment (OTTI) was found[477]. - The Company sold one investment security in 2022, resulting in a loss of $5 thousand, compared to a gain of $17 thousand from fourteen securities sold in 2021[478]. Employee and Talent Management - The ability to attract and retain skilled employees is critical for the Company's success, with competition for talent being intense[221].

Financial Performance - The Company reported its financial condition as of September 30, 2022, compared to December 31, 2021, and provided results for the three and nine months ended September 30, 2022, indicating ongoing operational assessments [210]. - Net income attributable to the Company for the three months ended September 30, 2022, was $4.1 million, a 52.5% increase from $2.7 million in the same period of 2021 [234]. - For the nine months ended September 30, 2022, net income attributable to the Company was $9.4 million, a 58.0% increase from $5.9 million in the same period of 2021 [234]. - The Company's annualized return on average assets for the three months ended September 30, 2022, was 0.98%, up from 0.66% in the same period of 2021 [241]. - Net income for the three months ended September 30, 2022, was $4,058 thousand, compared to $2,812 thousand for the same period in 2021, representing a 44.3% increase [260]. Income and Expenses - The Company derives the majority of its income from interest on loans and investment securities, with net interest income being a key measure of success [216]. - Net interest income for the three months ended September 30, 2022, increased by $3.0 million, or 25.0%, compared to the same period in 2021, reaching $14,875 thousand [262]. - Total interest income for the nine months ended September 30, 2022, increased by $3.1 million, or 7.6%, while total interest expense decreased by $2.0 million, or 28.6% [273]. - Noninterest income decreased by $834 thousand, or 40.2%, for the three months ended September 30, 2022, compared to the same period in 2021, and decreased by $2.6 million, or 39.1%, for the nine months ended September 30, 2022 [337]. - Noninterest expense for the three months ended September 30, 2022, decreased by $10 thousand, or 0.1%, while it increased by $365 thousand, or 1.2%, for the nine months ended September 30, 2022 [345]. Loans and Credit Quality - Loans, net of unamortized discounts, increased by $86.8 million, or 7.8%, to $1.20 billion as of September 30, 2022, driven by organic growth [253]. - The allowance for credit losses to total loans ratio was 1.15% at September 30, 2022, compared to 1.31% at December 31, 2021 [256]. - Nonperforming assets decreased to $4.3 million as of September 30, 2022, down from $9.8 million at December 31, 2021 [252]. - The provision for credit losses in Q3 2022 was $419 thousand, an increase of $449 thousand, or 1,496.7%, compared to a reversal of credit losses of $30 thousand in Q3 2021 [305]. - The Company experienced organic loan growth and loans acquired in the Virginia Partners acquisition that converted from acquired to originated status, contributing to the increase in the provision for credit losses [305]. Strategic Initiatives - Following the termination of the merger agreement with OCFC, the Company plans to review strategic alternatives to enhance shareholder returns, including potential internal initiatives and other strategic transactions [222]. - The Company expects to communicate an update regarding its strategic review in early 2023 [222]. - The ongoing COVID-19 pandemic and geopolitical conflicts, such as the war in Ukraine, are expected to impact the Company's financial results throughout the remainder of fiscal year 2022 and into 2023 [224]. - The Company has not recorded any impairment of goodwill for the nine months ended September 30, 2022, based on management's assessment [230]. - Management expects net interest income to rise in the future based on the current and projected interest rate environment [299]. Market and Economic Conditions - The financial performance of the Company is highly dependent on the business environment in its primary markets and the overall economic conditions in the United States [223]. - The Company has experienced disruptions in operations due to the COVID-19 pandemic, affecting production, demand, and employee productivity [224]. - The economic disruption from the COVID-19 pandemic and rising interest rates is expected to continue impacting the company's financial position throughout the remainder of fiscal year 2022 [313]. - The investment securities portfolio was negatively impacted by unrealized losses due to increases in market interest rates, which are expected to continue affecting the market value of the portfolio [360]. Assets and Deposits - Total assets as of September 30, 2022, were $1.65 billion, an increase of $5.7 million, or 0.3%, from December 31, 2021 [245]. - Total deposits as of September 30, 2022, were $1.46 billion, an increase of $13.1 million, or 0.9%, from December 31, 2021 [253]. - The loan-to-deposit ratio was 82.7% at September 30, 2022, compared to 77.4% at December 31, 2021, indicating a tighter funding environment [373]. - Non-interest bearing demand deposits increased to $568.1 million at September 30, 2022, a $74.2 million or 15.0% increase from $493.9 million at December 31, 2021 [371]. - Core deposits were $1.39 billion at September 30, 2022, an increase of $28.4 million or 2.1% from $1.36 billion at December 31, 2021 [373]. Capital Ratios - The Bank of Delmarva reported a Total Capital Ratio of 13.0% as of September 30, 2022, compared to 12.9% as of December 31, 2021 [386]. - Virginia Partners Bank's Total Capital Ratio was 11.4% as of September 30, 2022, up from 12.0% at the end of 2021 [386]. - The Tier 1 Capital Ratio for The Bank of Delmarva increased to 11.8% as of September 30, 2022, from 11.6% as of December 31, 2021 [386]. - The Tier 1 Leverage Ratio for The Bank of Delmarva was 8.7% as of September 30, 2022, compared to 8.1% as of December 31, 2021 [387]. - Virginia Partners Bank's Tier 1 Leverage Ratio stood at 8.6% as of September 30, 2022, up from 8.5% at the end of 2021 [387]. Liquidity Management - The Company has implemented internal policies to manage liquidity and limit reliance on non-core funding sources [390]. - Management actively reviews the liquidity position and has established guidelines for asset-based liquidity sources [390]. - The cash position at September 30, 2022, was $248.3 million, compared to $338.8 million at year-end 2021 [389]. - Advances available from the FHLB totaled approximately $422.0 million as of September 30, 2022, with $25.8 million drawn [390]. - The company anticipates that a stable base of deposits will be its primary source of funding for both short-term and long-term liquidity needs in the future [373].

Financial Performance - The Company reported its financial condition as of June 30, 2022, compared to December 31, 2021, with operating results for the three and six months ended June 30, 2022, not necessarily indicative of the full year results [214]. - Net income attributable to the Company for the three months ended June 30, 2022, was $3.2 million, a 47.0% increase from $2.2 million in the same period in 2021 [237]. - Total assets as of June 30, 2022, were $1.69 billion, an increase of $45.3 million, or 2.8%, from December 31, 2021 [246]. - Total deposits as of June 30, 2022, were $1.50 billion, an increase of $52.5 million, or 3.6%, from December 31, 2021 [253]. - Loans, net of unamortized discounts, were $1.17 billion as of June 30, 2022, an increase of $52.3 million, or 4.7%, from December 31, 2021 [247]. - Net interest income increased by $1.2 million, or 10.0%, to $12.889 million for the three months ended June 30, 2022, compared to $11.713 million in 2021 [259]. - The Company's annualized return on average assets for the three months ended June 30, 2022, was 0.76%, up from 0.55% in the same period in 2021 [242]. - The total interest income increased by $519 thousand, or 3.7%, to $14.5 million for the three months ended June 30, 2022 [262]. - The total interest expense decreased by $656 thousand, or 28.7%, to $1.6 million for the three months ended June 30, 2022 [262]. Loan and Credit Quality - The Company maintains an allowance for credit losses to absorb probable losses on existing loans, which is a critical accounting policy [224]. - The allowance for credit losses stood at $14,553 thousand as of June 30, 2022, slightly up from $14,498 thousand in the previous year, indicating a stable credit quality assessment [285]. - The provision for credit losses in Q2 2022 was $319 thousand, a decrease of $539 thousand, or 62.8%, compared to $858 thousand in Q2 2021 [299]. - Total nonperforming assets decreased to $4.6 million at June 30, 2022, from $9.8 million at December 31, 2021 [309]. - The ratio of nonperforming assets to total assets was 0.27% at June 30, 2022, compared to 0.60% at December 31, 2021 [306]. - The net charge-off ratio for total loans receivable was 0.29% for the quarter ended June 30, 2022, compared to 0.11% for the same period in 2021 [321]. - The Company continues to assess the impact of the COVID-19 pandemic and macroeconomic factors on its loan portfolio, with no material impact on delinquencies or nonperforming assets as of June 30, 2022 [300]. Market and Economic Conditions - The ongoing COVID-19 pandemic has disrupted operations and is expected to impact financial results throughout the remainder of fiscal year 2022 [227]. - The Company’s financial performance is highly dependent on the business environment in its primary markets and the overall U.S. economy [225]. - The Company is subject to various risks, including changes in interest rates, economic conditions, and competition from both banks and non-banks [219]. - The Federal Open Markets Committee raised Federal Funds target rates by a total of 150 basis points from March to July 2022, with a current target rate range of 2.25% to 2.50% [280]. - The Company anticipates an expanded net interest margin due to the current and projected interest rate environment [280]. Mergers and Acquisitions - The Company is in the process of merging with OceanFirst Financial Corp., with regulatory approvals pending and no timeline provided for completion [226]. - Merger-related expenses incurred during the three and six months ended June 30, 2022, were $157 thousand and $553 thousand, respectively [246]. - The Company has implemented internal policies to manage liquidity and limit the use of non-core funding sources [374]. Deposits and Funding - Average total deposits increased from $1.38 billion to $1.49 billion, an increase of $109.6 million, or 7.9%, for the three months ended June 30, 2022 compared to the same period in 2021 [355]. - Non-interest bearing demand deposits increased to $561.4 million at June 30, 2022, a $67.5 million, or 13.7%, increase from $493.9 million at December 31, 2021 [355]. - The Company's loan-to-deposit ratio was 78.2% at June 30, 2022, compared to 77.4% at December 31, 2021 [357]. - Core deposits were $1.42 billion at June 30, 2022, an increase of $60.4 million, or 4.4%, from $1.36 billion at December 31, 2021 [357]. Investment Securities - The investment securities portfolio averaged $146.6 million for the three months ended June 30, 2022, compared to $131.6 million for the same period in 2021, representing an increase of 11.4% [348]. - Investment securities available for sale at fair value totaled $135.4 million as of June 30, 2022, an increase of $13.4 million, or 11.0%, from $122.0 million at December 31, 2021 [349]. - The net unrealized losses in the Company's investment securities available for sale portfolio increased by approximately $14.4 million, or 3,009.7%, to $14.0 million at June 30, 2022 [353]. Operational Metrics - The Company plans to continue organic growth, including potential expansion into new market areas, such as the Greater Washington market [225]. - As of June 30, 2022, both Delmarva and Virginia Partners have returned to normal operations, with most employees back in the office [229]. - The Company has identified nine specific higher risk industries for credit exposure monitoring due to the impact of the COVID-19 pandemic [325].

Financial Performance - The Company reported a significant increase in net interest income, driven by a rise in interest rates, resulting in a net interest margin of 3.5% for the quarter ended March 31, 2022, compared to 3.2% for the same period in 2021[212]. - Net income attributable to the Company for Q1 2022 was $2.1 million, a 93.5% increase from $1.1 million in Q1 2021, resulting in earnings per share of $0.12[225]. - Net interest income for Q1 2022 was $11.9 million, up from $10.9 million in Q1 2021, while the provision for credit losses decreased significantly to $65 thousand from $1.74 million[241]. - The annualized return on average assets and return on average equity for Q1 2022 were 0.51% and 6.17%, respectively, compared to 0.29% and 3.28% in Q1 2021[229]. - Noninterest income decreased by $959 thousand, or 42.5%, compared to the same period in 2021, primarily due to a significant drop in mortgage banking income[293]. - Noninterest expense increased by $548 thousand, or 5.6%, compared to the same period in 2021, driven by higher operational costs[297]. Asset and Deposit Growth - The Company’s total assets increased to $1.2 billion as of March 31, 2022, up from $1.1 billion at the end of 2021, indicating a growth in the asset base[212]. - The Company reported a 10% increase in total deposits, reaching $900 million as of March 31, 2022, compared to $818 million in the previous year[212]. - Total assets as of March 31, 2022, were $1.69 billion, reflecting a 2.7% increase from $1.645 billion at the end of 2021[231]. - Total deposits increased by $48.6 million, or 3.4%, to $1.49 billion as of March 31, 2022, driven by organic growth and customer demand for liquidity[232]. - Average total deposits increased from $1.30 billion to $1.46 billion, a rise of $166.6 million, or 12.8%, for the three months ended March 31, 2022[325]. Loan Portfolio and Credit Quality - The Company’s loan portfolio showed a growth of 8%, totaling $750 million as of March 31, 2022, driven by increased demand for commercial loans[212]. - Loans, net of unamortized discounts, rose to $1.15 billion, a 3.2% increase from $1.11 billion at the end of 2021, with organic growth contributing approximately $17.8 million[232]. - Nonperforming assets decreased to $6.1 million, down from $9.8 million at the end of 2021, with nonaccrual loans also declining to $6.1 million[236]. - The provision for credit losses in Q1 2022 was $65 thousand, a decrease of $1.7 million, or 96.3%, from $1.7 million in Q1 2021, primarily due to reduced qualitative adjustments related to the COVID-19 pandemic[266]. - The allowance for credit losses to total loans ratio was 1.26% as of March 31, 2022, compared to 1.31% at the end of 2021[237]. Merger and Expansion - The proposed merger with OceanFirst Financial Corp. is anticipated to yield cost savings and revenue synergies, although there are risks associated with the integration process and regulatory approvals[215]. - The Company is actively pursuing organic growth opportunities, including expansion into the Greater Washington market, which is expected to enhance its market presence and customer base[214]. - The company experienced a $17.8 million increase in loans related to the expansion into the Greater Washington market, offset by $2.3 million in forgiveness payments under the PPP[311]. Economic and Regulatory Environment - The ongoing COVID-19 pandemic has impacted operations, with management implementing response plans that have allowed for a return to normal branch operations as of March 31, 2022[217]. - The Company’s management remains cautious about future economic conditions, particularly regarding inflation and interest rate volatility, which could impact financial performance[209]. - The Federal Open Markets Committee raised Federal Funds target rates by 25 basis points in March 2022, marking the first increase since December 2018[253]. - The Company anticipates that the current and projected interest rate environment will lead to an expanded net interest margin[253]. Capital and Liquidity - Virginia Partners' Tier 1 risk-weighted capital ratio was 10.7% as of March 31, 2022, down from 11.3% at the end of 2021, while still exceeding regulatory requirements[234]. - The Company’s liquidity position included cash and cash equivalents totaling $345.9 million at March 31, 2022, compared to $338.8 million at December 31, 2021[344]. - The Tier 1 Leverage Ratio for The Bank of Delmarva was 8.2% as of March 31, 2022, compared to 4.0% previously[341]. - The Company continues to assess the impact of the COVID-19 pandemic on its loan portfolio, with delinquencies and nonperforming assets not materially impacted as of March 31, 2022[267].

Merger and Acquisition - The Company announced a merger agreement with OCFC, where each share of Company common stock will be converted into either 0.4512 shares of OCFC common stock or $10.00, with a maximum of 40% of shares convertible into cash [134]. - The completion of the merger is subject to various regulatory approvals, which may impose unexpected conditions or delays, potentially affecting the Company's financial condition and operations [139]. - The merger may create uncertainties that could impair the Company's ability to attract and retain key personnel and customers [144]. - The Company has incurred substantial expenses related to the merger negotiations, which may not yield expected benefits if the merger is not completed [143]. - The Company may be subject to litigation related to the merger, which could delay or prevent its completion [149]. - The Company is restricted from soliciting other acquisition proposals while the merger is pending, which may limit opportunities for greater shareholder value [146]. Economic Impact and Risks - The ongoing COVID-19 pandemic has caused significant disruptions, leading to increased costs and reduced operating effectiveness, which may adversely impact the Company's financial results [152]. - The Company may experience increased expenses and credit losses due to the ongoing economic impact of the COVID-19 pandemic [152]. - The ongoing COVID-19 pandemic and geopolitical events, such as the conflict between Russia and Ukraine, may negatively impact the Company's financial performance and market conditions [170]. - The Company's profitability is significantly influenced by economic conditions in Delaware, New Jersey, Maryland, and Virginia, with local economic downturns potentially leading to increased loan delinquencies and non-performing assets [165]. - The Company faces competition from both traditional and nontraditional financial institutions, which may affect its profitability and market share [176]. - The Company is exposed to credit risk due to transactions with various financial institutions, which could adversely affect its financial condition if defaults occur [181]. - The Company faces environmental liability risks associated with its loan portfolio, which could lead to significant remediation costs [190]. - The accuracy of information from customers and counterparties is critical; reliance on inaccurate data could materially impact the Company's operations [191]. - The Company is exposed to various business risks, including interest rate risk, which arises from volatility in market interest rates affecting earnings and asset values [382]. Financial Performance - Net income for the year ended December 31, 2021, was $7,895,000, an increase of 25% from $6,323,000 in 2020 [410]. - Net interest income after provision for credit losses rose to $44,107,000 in 2021, compared to $36,988,000 in 2020, reflecting a 19% increase [410]. - Total other income decreased slightly to $8,322,000 in 2021 from $8,492,000 in 2020 [410]. - Salaries and employee benefits increased to $23,343,000 in 2021, up from $20,304,000 in 2020, marking a 10% rise [410]. - The provision for credit losses was $2,323,000 in 2021, significantly lower than $6,894,000 in 2020, indicating improved credit quality [410]. - Comprehensive income attributable to Partners Bancorp was $5,428,000 in 2021, down from $7,229,000 in 2020 [411]. - Cash and cash equivalents at the end of the period increased to $338,829,000 in 2021 from $282,611,000 in 2020, representing a 20% growth [416]. - The company reported a basic and diluted earnings per share of $0.42 for 2021, compared to $0.32 in 2020, reflecting a 31% increase [410]. Loan Portfolio and Credit Losses - The allowance for credit losses is maintained at a level believed to be adequate to absorb probable losses inherent in the loan portfolio, reflecting management's estimates based on current risk characteristics and economic conditions [429]. - The allowance for credit losses was $14,656,000 as of December 31, 2021, compared to $13,203,000 in 2020, reflecting an 11% increase [483]. - The total amount of originated loans reached $913,314,000 in 2021, up from $731,022,000 in 2020, marking a 24.8% growth [483]. - The company reported a significant increase in residential real estate loans, which rose to $201,230,000 in 2021 from $199,349,000 in 2020, a growth of 0.9% [483]. - Nonresidential loans increased to $642,217,000 in 2021, compared to $569,745,000 in 2020, reflecting a growth of 12.7% [483]. - The company has segmented its loan portfolio into classifications such as Real Estate Mortgage, Commercial, and Consumer and Other Loans for better risk assessment [484]. - The allowance for collectively evaluated loans stands at $12,489 thousand, with the largest portion being $7,567 thousand attributed to nonresidential loans [492]. Regulatory and Compliance - The Company is subject to regulatory limits on dividend payments from its subsidiaries, which depend on their profitability and financial condition [175]. - Regulatory capital rules require a common equity Tier 1 capital ratio of 4.5% and a total risk-based capital ratio of 8.0%, which the Company currently exceeds [199]. - Regulatory changes may impose additional compliance costs and operational constraints, affecting the Company's business strategy and financial condition [193]. - Legal and regulatory actions could result in significant fines and increased expenses, adversely affecting the Company's financial condition [218]. Cybersecurity and Operational Risks - The Company faces risks related to cybersecurity as its operations increasingly rely on electronic transactions [135]. - The Company faces increased cybersecurity risks due to reliance on electronic means for operations, with potential costs from cyber-attacks that could include remediation and reputational damage [206][208]. - The financial performance may suffer if the Company's information technology cannot keep pace with industry developments and customer demands [209]. - The Company has developed a comprehensive business continuity plan to mitigate risks from disruptions or failures of critical systems [221]. Market Conditions and Interest Rates - Changes in interest rates could negatively affect the Company's net interest income, which is crucial for its earnings and cash flows [158]. - The Federal Reserve increased the target federal funds rate to a range of 0.25%-0.5% on March 16, 2022, with further increases expected, which may positively impact net interest income but negatively affect the housing market [159]. - The Company's operations are affected by fluctuations in interest rates, inflation, and other economic factors, which are beyond its control [162]. - The economic value of equity (EVE) showed a percentage change in market value of capital of 41.0% in a +400 basis point scenario and -35.0% in a -400 basis point scenario [391].